CEO Confident Level And Capital Structure Optimizing Adjustment

The influence that managers made on capital structure was first highlighted by capital structure management control theory. Traditional financial theory research on managers and corporate financial decision is based on the precondition that managers are rational, ignoring the reality that as a natural person, managers’ behavior is subject to the psychological, emotional impact, preferences and so on. The behavioral finance revised the view that managers are rational, giving full consideration to the irrational behavior of managers, especially the impact that overconfident managers made on corporate financial decisions. Based on the background that C hinese listed companies’ low capital structure and slower capital structure optimizing adjustment speed, the paper research the relationship between managers’ confident degree and optimal capital structure deviation, capital structure optimizing adjustment speed, the asymmetry of capital structure up and down adjustment.Based on the literature review of CEO confident level, capital structure, and the relationship between these two variables, the paper proposed research framework. From the perspective of normative and empirical, measuring the degree of C EO’s self-confidence both from C EO’s features and companies’ characteristics, using the Multivariable Linear Return investigate how CEO’s confident level influence optimal capital structure deviation, capital structure optimizing adjustment speed and the asymmetry of capital structure up and down adjustment. Empirical results show as follows. C EO’s confident level and the absolute value of Capital Structure Deviation takes a "U" shaped relationship. Companies whose CEO are lack of confidence or overconfidence, their capital structure optimizing adjustment speeds are slower than the companies whose C EO are moderate confidence. The upward speed of capital structure optimizing adjustment is significantly slower than the downward speed. Finally, according to the empirical results, the paper proposed the politic suggestions, including establish a reasonable evaluation system of managers’ features; improving corporate governance, strengthening internal oversight; establish and improve the policy recommendations of the external market mechanisms.Measuring the level of managers’ self-confidence both from managers’ features and companies’ characteristics, using the panel Logistic Return investigate how managers’ confident degree influence optimal capital structure deviation, capital structure optimizing adjustment speed and the asymmetry of capital structure up and down adjustment. The paper extends the measure of managers’ overconfidence, enriching the relationship between capital structure and managers’ overconfidence in a certain level, and enriching the theory of capital structure management control.